Case Number: EC062187 Hearing Date: May 23, 2014 Dept: B

Demurrer and Motion to Strike

The Plaintiff alleges it leased commercial property from the Defendants and used the property to operate a business, Quizno’s. The Plaintiff decided to sell the business. The Plaintiff obtained a buyer who agreed to assume the lease.

When the Plaintiff sought approval of an assignment of the lease, Plaintiff alleges the Defendants began to harass the Plaintiff and to interfere with the Plaintiff’s business. In addition, the Defendants attempted to interfere with the sale. The Defendants’ interference caused the Plaintiff to lose the buyers, its customers, and its business.

The causes of action in the Complaint are:
1) Breach of Lease
2) Breach of Civil Code section 1995.310
3) Declaratory Relief
4) Intentional Interference with Economic Advantage
5) Negligent Interference with Economic Advantage
6) Breach of Implied Covenant of Good Faith and Fair Dealing
7) Declaratory Relief
8) Fraud

This hearing concerns the Defendants’ demurrer and motion to strike.

1. Demurrer to First Cause of Action for Breach of Lease

This cause of action is based on the claim that the Defendants breached the lease agreement by refusing to consent to the assignment of the lease to the potential buyers of the business. The essential elements of a cause of action for breach of contract are the following:

1) the contract,
2) plaintiff’s performance or excuse for nonperformance,
3) defendant’s breach, and
4) the resulting damages to plaintiff.
Reichert v. General Ins. Co. (1968) 68 Cal. 2d 822, 830.

The Defendants argue that the Plaintiff does not plead the element of the Plaintiff’s performance of the lease agreement. A review of the pleadings reveals no allegation that the Plaintiff performed his obligations or that he was excused from performing his obligations under this lease. This is insufficient to plead the cause of action.

The opposition papers fail to direct the Court to any paragraph in which the Plaintiff alleges that he performed his duties. Since the first cause of action lacks allegations regarding the essential element of the Plaintiff’s performance, it does not plead a cause of action for breach of contract.

Therefore, the Defendants’ demurrer to the first cause of action is sustained with 10 days leave to amend.

2. Demurrer to Second Cause of Action for Breach of Civil Code section 1995.310

This cause of action is based on the claim that the Defendants violated Civil Code section 1995.310. Section 1995.310 identifies a tenant’s remedies for a landlord’s unreasonable withholding of consent to transfer interest in lease. Section 1995.310 states that the tenant has all the remedies for breach of contract plus a right to contract damages caused by the landlord’s breach and the right to terminate the lease. This section authorizes a tenant to obtain additional remedies for a breach of contract claim, i.e., the tenant has all the remedies for breach of contract plus the two additional remedies.

As noted above, Plaintiff’s contract claim is deficient in that it doesn’t allege the essential elements of Plaintiff’s performance, although correctable.

Therefore, the Court sustains the Defendants’ demurrer to the second cause of action based on the deficits in its breach of contract cause of action.. Since this defect is reasonably possible to correct by amendment, the Court grants 10 days leave to amend the second cause of action

3. Demurrer to Fourth Cause of Action for Intentional Interference with Economic Advantage and to Fifth Cause of Action for Negligent Interference with Economic Advantage

These causes of action are based on the Plaintiff’s claim that the Defendants interfered with the Plaintiff’s economic relationship with Peter Plotitsa, who was the potential buyer for the Plaintiff’s business.

A cause of action for intentional interference with economic advantage has the following essential elements:

1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff;
2) the defendant’s knowledge of the relationship;
3) intentional acts on the part of the defendant designed to disrupt the relationship;
4) actual disruption of the relationship; and
5) economic harm to the plaintiff proximately caused by the acts of the defendant.
Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal. 4th 1134, 1153.

A cause of action for negligent interference with prospective economic advantage must include the following elements:

1) an economic relationship existed between the plaintiff and a third party which contained a reasonably probable future economic benefit or advantage to plaintiff;
2) the defendant knew of the existence of the relationship and was aware or should have been aware that if it did not act with due care its actions would interfere with this relationship and cause plaintiff to lose in whole or in part the probable future economic benefit or advantage of the relationship;
3) the defendant was negligent; and
4) such negligence caused damage to plaintiff in that the relationship was actually interfered with or disrupted and plaintiff lost in whole or in part the economic benefits or advantage reasonably expected from the relationship.
Venhaus v. Shultz (2007) 155 Cal. App. 4th 1072, 1078.

A plaintiff seeking to recover for an alleged interference with prospective contractual or economic relations must plead and prove as part of its case-in-chief that the defendant engaged in conduct that was wrongful by some legal measure other than the fact of interference itself. Della Penna v. Toyota Motor Sales, U.S.A. (1995) 11 Cal. 4th 376, 393. These torts are not intended to punish individuals or commercial entities for their choice of commercial relationships or their pursuit of commercial objectives, unless their interference amounts to independently actionable conduct. Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal. 4th 1134, 1158-1159. An act is independently wrongful if it is unlawful, that is, if it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard. Id.

The Defendants argue that the Plaintiff has not pleaded that they engaged in any conduct that is wrongful or that amounts to independently actionable conduct.

In the fourth cause of action, the Plaintiff alleges in paragraph 77 that the Defendants engaged in intentional and wrongful conduct designed to interfere with the Plaintiff’s agreement with Peter Plotitsa. In the fifth cause of action, the Plaintiffs alleges in paragraph 88 that the Defendants’ actions interfered with the relationship between the Plaintiff and Peter Plotitsa. The Plaintiff does not identify the Defendants’ conduct in the fourth or fifth causes of action; instead, the Plaintiff refers to paragraphs 24 through 33 in a parenthetical to paragraphs 77 and 88.

A review of paragraphs 24 to 33 reveals that they contains the following allegations related to the Defendants’ refusal to approve the sale of the business to Peter Plotitsa:

1) Mr. Plotitsa had not provided sufficient financial information;
2) Mr. Plotitsa was not a national chain;
3) Mr. Plotitsa was hiding something;
4) Mr. Plotitsa had low personal income tax returns; and
5) Mr. Plotitsa had a problem with the credit score.

There are no allegations that identify any conduct that is wrongful by some legal measure, i.e., conduct that is proscribed by constitutional, statutory, regulatory, common law, or other legal standard. Instead, these allegations plead that the Defendants refused to approve an assignment of the lease to the buyer. This is insufficient to plead a wrongful act that is wrongful by some legal measure other than the fact of interference itself.

Further, the Plaintiff alleges that the Defendants’ refusal to approve the assignment to Peter Plotitsa was a breach of their duties under the lease agreement. However, under California law, conduct amounting to a breach of contract becomes tortious only when it also violates a duty independent of the contract arising from principles of tort law. Erlich v. Menezes (1999) 21 Cal. 4th 543, 551. An omission to perform a contract obligation is never a tort, unless that omission is also an omission of a legal duty. Id. Examples of cases permitting tort damages in contract cases are the following:

1) breaches of contractual duties that cause physical injuries;
2) breaches of the covenant of good faith and fair dealing in insurance contracts;
3) wrongful discharge in violation of public policy;
4) the fraudulent inducement of a contract.
Id. at 551-552.

Here, the Plaintiff does not plead conduct that violates a duty independent of the contract arising from principles of tort law. Instead, the Plaintiff is pleading that the Defendants breached their duties under the contract by refusing to approve the assignment. The Plaintiff cannot use this breach of a contract duty to plead a tort claim, i.e., this breach of the contract cannot be a tortious interference with prospective economic relations.

Therefore, the Court sustains the demurrers to the fourth and the fifth causes of action with 10 days leave to amend.

4. Demurrer to Eighth Cause of Action for Fraud

This cause of action is based on allegations that the Defendants concealed information about the square footage of the space and made misrepresentations that there were no events that could give rise to a default. The Plaintiff is combining two separate causes of action, fraud by concealment and fraud by misrepresentation, into a single cause of action. This is grounds for a demurrer because the Plaintiff must plead each legal theory in a separate cause of action, i.e., a cause of action for fraud by concealment based on the allegations that the Defendants concealed material facts that they had a duty to disclose and a cause of action for fraud by misrepresentation based on allegations that the Defendants made false representations of fact with the intent to induce reliance upon their false representations.

In addition, facts constituting each element of torts of deceit must be alleged with particularity; the claim cannot be saved by referring to the policy favoring liberal construction of pleadings. Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 216. Since fraud must be pleaded with particularity, the complaint must allege facts showing how, when, where, to whom, and by what means the representations were tendered. Stansfield v. Starkey (1990) 220 Cal.App.3d 59, 73.

There are no particular allegations demonstrating that the Defendants had a duty to disclose the material facts to the Plaintiff. See e.g., Lovejoy v. AT&T Corp. (2004) 119 Cal. App. 4th 151, 157-158 (holding that an essential element of fraud by concealment is that the defendant must have been under a duty to disclose the fact to the plaintiff. There are no particular allegations that demonstrate that the Plaintiff justifiably relied upon the Defendants’ representations. See e.g., Stansfield v. Starkey (1990) 220 Cal. App. 3d 59, 72-73 (holding that an essential element of fraud by false representation is justifiable reliance upon the misrepresentation). This is insufficient to plead the fraud claim.

Therefore, the Court sustains the demurrer to the eighth cause of action with 10 days leave to amend

5. Motion to Strike

The Defendants seek to strike twenty portions from the Complaint. Under CCP section 436, the Court may strike out false, irrelevant, or improper matter in a pleading. A motion to strike should be applied cautiously and sparingly because it is used to strike substantive defects. PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, 1682-1683. A defendant cannot use a motion to strike as a “line item veto.” Id.

First, the Defendants seek to strike paragraphs 16, 21, 48, 49, 52, 53, 56, 57, 58, 62, 63, 66, 67, 93, 94, 104, 106, 107, 110, and 111. The Defendants do not proceed through each of these paragraphs and identify any substantive defects. A review of these paragraphs reveal that they allege background information, e.g., the allegation in paragraph 16 that Quizno’s was preparing to file bankruptcy, the Plaintiff’s beliefs, e.g., the allegation in paragraph 49 that the Defendants’ conduct destroyed the business, or citations to law, e.g., the allegations in paragraph 62 that cite to case law. These are not substantive defects and there are no grounds to strike any of these allegations.

Second, the Defendants seek to strike the request for punitive damages in paragraphs 81 and 82. These allegations are within the fourth cause of action for intentional interference with prospective economic advantage.

Since the Court sustains the demurrer to the fourth cause of action this motion to strike is now moot as these paragraphs will be removed by the demurrer.

Third, the Defendants seek to strike the third, fourth, and fifth causes of action in their entirety. Under California law, it is improper for a Court to strike a whole cause of action of a pleading under CCP section 436. Quiroz v. Seventh Ave. Center (2006) 140 Cal. App. 4th 1256, 1281. Where a whole cause of action is the proper subject of a pleading challenge, the Court should sustain a demurrer to the cause of action rather than grant a motion to strike. Id. Since a motion to strike cannot be used to strike a whole cause of action, the Court denies the request to strike the third, fourth, and fifth causes of action.

Therefore, the Court denies the Defendant’s motion to strike in its entirety.